Larry Davis borrows $79,000 at 12 percent interest toward the purchase of a home. His mortgage is for 30 years. Use Appendix D for an approximate answer, but calculate your final answer using the formula and financial calculator methods. a. How much will his annual payments be? (Although home payments are usually on a monthly basis, we shall do our analysis on an annual basis for ease of computation. We will get a reasonably accurate answer.) (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Annual payments b. How much interest will he pay over the life of the loan? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Annual payments c. How much should he be willing to pay to get out of a 12 percent mortgage and into a 10 percent mortgage with 30 years remaining on the mortgage? Assume current interest rates are 10 percent. Carefully consider the time value of money. Disregard taxes. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) Annual payments Appendix D Present value of an annuity of $1, PV FA PVA = A 1 1 -- (1 + i)" Percent 1% 2% 3% 4% 5% 6% 9% 10% 11% 12% Period 1. 0.952 0.893 1.690 2 0.990 1.970 2.941 3.902 0.971 1.913 2.829 3.717 0.962 1.886 2.775 3.630 0.943 1.833 2.673 3.465 1.859 2.723 3.546 3 4 5 4.452 4.853 5.795 0.980 1.942 2.884 3.808 4.713 5.601 6.472 7.325 8.162 8.983 9.787 4.212 4.917 6. 2.402 3.037 3.605 4.111 4.564 4.968 7 4.580 5.417 6.230 7.020 7.786 8.530 9.253 9.954 0.917 1.759 2.531 3.240 3.890 4.486 5.033 5.535 5.995 6.418 6.805 5.242 6.002 6.733 7.435 8.111 8.760 8 % 7% 0.935 1.808 2.624 3.387 4.100 4.767 5.389 5.971 6.515 7.024 7.499 7.943 8.358 8.745 9.108 4.329 5.076 5.786 6.463 7.108 7.722 8.306 8.863 6.728 7.652 8.566 9.471 10.368 11.255 12.134 8% 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 7.139 7.536 7.904 8.244 8.559 5.582 6.210 6.802 7.360 7.887 9 10 11 0.901 1.713 2.444 3.102 3.696 4.231 4.712 5.146 5.537 5.889 6.207 6.492 6.750 6.982 7.191 7.379 7.549 12 10.575 9.385 8.384 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 6.495 6.814 7.103 7.367 7.606 7.824 8.022 8.201 8.365 8.514 9.077 9.427 9.779 9.915 7.161 5.328 5.650 5.938 6.194 6.424 6.628 6.811 13 11.348 10.635 9.986 9.394 8.853 14 10.563 13.004 13.865 14.718 12.106 12.849 11.296 11.938 12.561 9.899 10.380 15 7.487 7.786 8.061 11.118 16 13.578 11.652 10.838 9.447 8.851 8.313 6.974 9.295 9.712 10.106 10.477 10.828 11.158 17 15,562 9.763 18 10.059 12.166 12.659 13.134 13.590 19 10.336 14.292 14.992 15.678 16.351 19.523 22.396 27.355 31.424 11.274 11.690 12.085 12.462 14.094 16.398 17.226 18.046 22.023 25.808 32.835 39.196 13.166 13.754 14.324 14.877 17.413 19.600 23.115 25.730 20 9.122 9.372 9.604 9.818 10.675 11.258 7.120 7.250 7.366 7.469 7.843 8.055 8.544 8.756 8.950 9.129 9.823 10.274 10.757 10.962 25 7.702 7.839 7.963 8.422 8.694 15.622 30 11.470 12.783 13.765 15.046 15.762 15.372 10.594 11.654 12.409 13.332 13.801 17.292 19.793 21.482 40 11.925 8.951 17.159 18.256 8.244 8.304 50 12.233 9.042 Appendix D (concluded) Present value of an annuity of $1 Percent 14% 20% 25% 35% 40% Period 1. 2 0.877 1.647 2.322 2.914 15% 0.870 1.626 2.283 18% 0.847 1.566 2.174 2.690 19% 0.840 1.547 2.140 0.800 1.440 1.952 16% 0.862 1.605 2.246 2.798 3.274 3.685 4.039 50% 0.667 1.111 1.407 1.605 3 4 2.639 17% 0.855 1.585 2.210 2.743 3.199 3.589 3.922 4.207 4.451 5 2.855 3.352 3.784 3.433 6 2.362 2.689 2.951 3.127 3.498 3.812 3.889 4.288 3.058 3.410 3.706 1.737 1.824 1.883 7 4.160 4.487 0.833 1.528 2. 106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 4.327 4.439 4.533 4.611 30% 0.769 1.361 1.816 2.166 2.436 2.643 2.802 2.925 3.019 3.092 3.147 3.190 3.223 3.249 3.268 8 4.639 0.714 1.224 1.589 1.849 2.035 2.168 2.263 2.331 2.379 2.414 2.438 2.456 2.469 2.478 4.344 13% 0.885 1.668 2.361 2.974 3.517 3.998 4.423 4.799 5.132 5.426 5.687 5.918 6.122 6.302 6.462 6.604 6.729 6.840 6.938 7.025 7.330 1.922 1.948 9 3.161 3.329 3.463 3.571 3.656 3.725 4.772 5.019 5.234 10 3.954 4.163 4.339 4.486 4.607 4.833 5.029 5.197 1.965 1.977 11 12 5.421 5.583 5.724 13 1.985 1.990 0.741 1.289 1.696 1.997 2.220 2.385 2.508 2.598 2.665 2.715 2.752 2.779 2.799 2.814 2.825 2.834 2.840 2.844 2.848 2.850 2.856 2.857 2.857 2.857 4.611 4.715 4.802 5.342 5.468 3.780 4.078 4.303 4.494 4.656 4.793 4.910 5.008 5.092 5.162 5.222 5.273 5.316 14 3.824 1.993 15 5.847 5.575 4.876 4.675 3.859 2.484 1.995 16 4.946 5.216 5.453 5.660 5.842 6.002 6.142 6.265 6.373 6.467 6.550 6.623 6.873 7.003 7.105 7.133 3.887 1.997 17 4.659 4.836 4.988 5.118 5.229 5.324 5.405 5.475 5.534 5.584 5.628 5.766 5.829 5.871 5.880 5.954 6.047 6.128 6.198 4.938 4.988 5.033 5.070 4.730 4.775 4.812 5.668 5.749 5.818 5.877 5.929 6.097 3.910 3.928 18 2.489 2.492 2.494 2.496 2.497 2.499 1.998 1.999 1.999 19 4.843 20 6.259 6.464 5.353 5.467 5.101 5.195 3.283 3.295 3.304 3.311 3.316 3.329 3.332 3.333 3.333 25 3.942 3.954 3.985 3.995 3.999 4.000 30 7.496 6.177 5.517 4.870 4.948 4.979 4.997 4.999 5.235 2.500 1.999 2.000 2.000 2.000 2.000 6.566 6.642 6.661 40 7.634 7.675 6.233 6.246 5.548 5.554 5.258 5.262 2.500 2.500 50